The president of the United States Export-Import Bank admitted on Tuesday morning that the bank is unlikely to reduce its support for U.S. exports as the economy improves.
Fred Hochberg, the bank’s current president and chairman, made this prediction in a press gaggle after a smooth reconfirmation hearing before the Senate Banking, Housing, and Urban Affairs Committee.
The hearing came as the Export-Import Bank (Ex-Im) is being sued by Delta Airlines for supporting Delta’s foreign competitors and is coming under fire from some conservative groups for doling out "corporate welfare."
When asked if Ex-Im financing levels would drop as the economy improves, Hochberg said, "I think that would have been the case historically, but I don’t see that happening now."
Hochberg cited several reasons for the bank continuing its current levels of financing. President Barack Obama is seeking to double American exports, the Basel III banking accords affects banks’ ability to make long-term loans, and American companies are exporting to "emerging economies" without strong banks—all factors that require Ex-Im’s continued work, Hochberg said.
Congress reauthorized the bank after a bitter fight in the House of Representatives last year. Part of the deal that won the bank reauthorization required the treasury secretary to initiate negotiations with other countries to reduce and ultimately eliminate export subsidies.
The Treasury Department did not return a request for comment on the status of these negotiations.
Committee ranking member Mike Crapo (R., Idaho) raised several objections to the bank in his opening statement, including that the bank offers "corporate welfare" to businesses and some of its financing hurts domestic companies.
The three Democrats who attended the hearing praised Hochberg’s work at the bank.
"When he took over the bank, the U.S. was still in the midst of the worst financial crisis since the Great Depression," said committee chairman Tim Johnson (D., S.D.).
"Under his leadership, the bank was able to expand financing for American exporters when private financing was difficult, if not impossible, to acquire."
Ex-Im provides financing, in the form of direct loans or loan guarantees, to foreign customers of companies who make their products in America. These companies typically are American-owned, although there is at least one example of a Chinese firm receiving financing from Ex-Im.
Ex-Im did more financing over the past four years than over the eight before that, Hochberg testified before the committee.
"We were in the midst of a recession and commercial banks were reluctant to lend, making Ex-Im Bank’s ability to fill the void all the more critical," Hochberg said in his written testimony. Ex-Im’s work often serves to counter the natural cycles of the market, Hochberg testified.
Delta Airlines is currently suing the Ex-Im Bank over the support the bank gave some of Delta’s competitors. Delta alleges that the financing Ex-Im provided these foreign airlines gives them a competitive advantage over Delta.
Much of Ex-Im’s financing goes to the American airplane manufacturer Boeing, which sells its planes to both domestic and foreign airliners. Between fiscal year 2007 and 2008, 65 percent of Ex-Im’s loan guarantees went to Boeing purchases. That figure rose to almost 83 percent in fiscal year 2012.
Hochberg said domestic businesses can petition for "countervailing subsidies" to offset the advantage that Ex-Im financing gives foreign buyers.
The Club for Growth opposes Hochberg’s reappointment to head Ex-Im, said spokesman Barney Keller. He called Ex-Im "a slush fund for corporate welfare" and said the government should shut it down.
Financing from Ex-Im would continue to rise, Keller predicted.
"As long as the taxpayer funded gravy train continues … the size of the loans that the Export-Import bank continues to make will continue to grow," Keller said.
A spokesman for Heritage Action, another critic of the bank, echoed Keller’s concern.
"Do you really want a guy in there who’s expanding taxpayer liability on this stuff?" Heritage Action’s Dan Holler asked.
Sen. Elizabeth Warren (D., Mass.) used her allotted time during the hearing to ask about America’s free trade agreement with South Korea and banking regulations—areas over which Ex-Im has no authority, Hochberg informed her.